Failure to comply could lead to a ban on exports to the EU
TORONTO, March 12, 2008 — Despite a November 30 deadline for taking steps to comply, a new PricewaterhouseCoopers (PwC) survey shows awareness of Registration, Evaluation, Authorization and Restriction of Chemicals (REACH) is alarmingly low, especially in North America and outside the chemicals industry. Failure to meet the terms of REACH could lead to a ban on exports to the EU so compliance is relevant to producers around the world, not just those in Europe.
REACH became law on June 1, 2007, to streamline and improve the former legislative framework on chemicals of the European Union (EU). REACH places greater responsibility on industry to manage the risks that chemicals may pose to health and the environment. In principle, REACH applies to all chemicals, not only chemicals used in industrial processes but also in products such as cleansers, paints and appliances that touch our day-to-day lives. The aims of REACH are to:
- Improve the protection of human health and the environment from the risks that can be posed by chemicals
- Enhance the competitiveness of the EU chemicals industry, a key sector for the economy of the EU
- Promote alternative methods for the assessment of hazards of substances
- Ensure the free circulation of substances on the internal market of the European Union
"There's no question REACH will have a major impact on businesses that use or produce chemical substances," says Dean Mullett, leader of the Canadian industrial products practice. "Compliance will be expensive and challenging."
The survey of 241 senior executives across six industries in 29 countries found that two in five companies have limited awareness of the regulation and one in four executives feels Europe's newest rules on chemicals and their safe use will have no impact on operations. European firms are the most aware of REACH with North American companies falling behind by a considerable margin. Large companies have greater awareness of REACH than smaller ones.
Among industries, chemicals leads the way on awareness followed by pharmaceuticals, industrial manufacturing, forest, paper and packaging, retail and consumer, and automotive.
This widespread lack of awareness raises concerns that North American companies may miss important REACH deadlines and, as a result, suffer significant business disruptions. In contrast, companies first in line to meet the REACH pre-registration deadlines gain competitive advantages because the law allows them to continue operating as usual and extends the timeline to register existing substances used in the European market.
The European Chemicals Agency (ECHA) estimates that between 10% and 30% of classified chemicals listed with the ECHA will disappear as a result of REACH. Early communication with downstream companies and suppliers, whose businesses may be adversely impacted by the disappearance of these substances, is essential to maintain supply chains. However, most North American respondents to our survey had not discussed REACH with customers or suppliers and only half of European companies said they have initiated contact with suppliers concerning REACH. "This apparent lack of action to contact suppliers and engage in discussions with downstream companies and customers may negatively affect business," notes Mullett.
Most organizations said they have not yet completed risk assessments on how REACH will impact their businesses. Only 10% had completed a detailed assessment and 31% had no risk assessment at all. Asia-Pacific and North American companies are the least prepared in terms of carrying out the necessary level of risk assessment to measure the impact of the REACH legislation.
Those executives surveyed who are in the know about REACH said there would be risks to implementing the law. Over half cited the cost and time involved, followed closely by supplier risk (49%). Only 14% of executives surveyed feel REACH will have a positive impact on their businesses; the majority are withholding judgement until the legislation comes into effect.
When asked what action companies were most likely to take as a result of the REACH legislation, an overwhelming 66% said to ensure suppliers adhere to REACH compliance deadlines, otherwise known as supply chain assurance. Another 46% said they would take action to help suppliers comply with REACH, and 45% said the legislation would require them to renegotiate or modify their supplier contracts.
"Only those companies that meet pre-registration deadlines for REACH will truly capitalise on the legislation. This includes continuing to operate business as usual and qualifying for an extended timeline to register existing substances used in the European market. REACH-compliant businesses can potentially be seen as forward thinking, responsible and efficient," concludes Mullett.
Waking up to REACH is available to download at www.pwc.com/chemicals.
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